A Year In: Trump’s Second-Term Economy Shows Growth Without Jobs

One year into Donald Trump’s second presidency, the U.S. economy looks both familiar and different. Growth has continued, consumers are still spending, and inflation has cooled modestly. But beneath the headline numbers, cracks are visible — particularly in the labor market.

Trump took office for a second term in January 2025 with sweeping plans to reshape trade, immigration, and the federal workforce. Those policies moved quickly, and economists say the speed and scale of change have played a major role in defining the economy during his first year back in the White House.

“The uncertainty was everywhere,” said Elizabeth Renter, a senior economist at NerdWallet. “Consumers, job seekers, and businesses were all trying to interpret policy changes in real time, often without clear data to guide decisions.”

A Job Market Losing Momentum

The most striking economic signal from 2025 was weak job growth. The U.S. added just 584,000 jobs over the year — the slowest pace outside of a recession since 2003. Hiring cooled across multiple sectors as businesses pulled back amid tariff increases, immigration changes, and lingering fears of a downturn.

Jason Draho, head of asset allocation Americas at UBS Global Wealth Management, said policy uncertainty alone was enough to make employers cautious.

“Even if a company isn’t directly hit by tariffs, the fear of broader economic drag makes firms reluctant to invest and hire,” Draho explained.

Economists warn that such a slow pace of hiring cannot persist indefinitely. Renter noted that confidence in income is closely tied to spending habits — and prolonged job-market weakness could eventually cause households to tighten their budgets.

Growth Without Hiring

Despite sluggish employment gains, the broader economy has continued to grow. After contracting in the first quarter of 2025, real GDP rebounded in the second and third quarters as companies accelerated activity ahead of new tariffs.

Gregory Daco, chief economist at EY, described the moment as a “jobless expansion” a rare combination of solid output growth with minimal hiring.

“The U.S. economy has shown remarkable resilience,” Daco said, pointing to forces reshaping the labor market, including an aging population, reduced net migration, and advances in automation and artificial intelligence.

Businesses, he added, are increasingly selective about hiring because they simply don’t need as many workers as they once did.

Federal Workforce Shrinks Sharply

One area where jobs clearly disappeared was the federal government. Federal employment fell 9% year over year by December, following administration-led initiatives aimed at reducing workforce size. Buyouts and reductions-in-force, coordinated by the Department of Government Efficiency, led to a particularly steep decline in October, when deferred resignations officially took effect.

For workers caught in the cuts, the impact has been personal. Cameron Hilaker, a former emergency manager at the U.S. Agency for International Development, lost his job last spring and has yet to find new employment.

“We were fully unprepared for this,” Hilaker said. “I stayed home with our newborn because we couldn’t afford childcare without my government paycheck. Budgets are tight.”

Manufacturing Still Struggles

Manufacturing employment fell 0.5% from a year earlier, continuing a trend that predates Trump’s return to office. While the administration has promoted tariffs as a way to bring manufacturing back to the U.S., economists say rebuilding domestic production is expensive, slow, and far from guaranteed.

“Tariffs may have done more harm than good for manufacturers that depend on imported inputs,” Renter said.

The White House disputes that narrative. Spokesperson Kush Desai pointed to rising industrial production and record capital goods shipments as evidence of future manufacturing strength. “President Trump has delivered accelerating GDP growth and strong investment fundamentals,” Desai said.

What Comes Next

With one year complete, economists expect the pace of economic change to slow. Draho said the most consequential policies — tariffs, tax cuts, and federal restructuring — are largely already in place. Recent proposals, such as a credit card interest-rate cap and adjustments to mortgage-backed securities purchases, are unlikely to significantly alter the macroeconomic picture.

Still, the defining question remains whether consumer spending — the backbone of recent growth — can hold up if job creation fails to rebound.

“One year down, three more to go,” Draho noted. “And the labor market will ultimately determine how durable this expansion really is.”

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